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Gov’t okays Ashmore purchase of 40% Aramco shares in Petron

05/13/2008

The government has allowed London-listed Ashmore Group to buy Saudi Aramco’s 40-percent stake in Petron Corp. for $550 million.

The government added it does not have any plans at the moment to sell its remaining 40-percent stake in the oil refiner.

The government, through Philippine National Oil Co., will keep its holdings in Petron at 40 percent and would not match Ashmore’s offer, PNOC chairman Antonio Cailao said.

“We are reaffirming the approval of the sale of Aramco Overseas Co.’s 40-percent equity in Petron,” Cailao added.

Ashmore, through unit SEA Refinery Holdings, had offered to buy Saudi Aramco’s 3.75 billion shares in Petron, currently held under the name of unit Aramco Overseas Co., for $550 million.

State-owned PNOC owns 40 percent of Petron, one of the only two oil refiners in the Philippines.

Under an agreement between PNOC and Aramco signed in 1994, Aramco should first offer its 40-percent stake in Petron to PNOC in case it decides to exit the company before it entertains offers from other buyers.

Energy Secretary Angelo Reyes said buying out its Saudi partner would have contradicted Manila’s “policy of privatising government stakes in corporations and letting the private sector run commercial enterprises as effectively and efficiently as possible.”

Saudi Aramco supplies the crude oil requirement of Petron, which in turn accounts for about 40 percent of the Southeast Asian nation’s total fuel requirements.

Cailao explained that even prior to the sale of Saudi Aramco’s shares, there was no plan to sell PNOC’s stake in Petron.

“Before the sale of Aramco shares, there was no contemplation that PNOC will sell its shares….and nothing has changed,” added Cailao during a press briefing Monday after the PNOC board approved the sale of Saudi Aramco’s 40-percent shares (in Petron) to the Ashmore Group.

Cailao further revealed that the Gokongwei Group’s offer is 10-percent higher than the price being offered by Ashmore, amounting to $550 million with Saudi Aramco for its 40-percent shares.

“We are not there yet (to decide on the sale of our shares in Petron),” he said.

Petron’s 2008 first quarter income dropped by 31 percent to P658 million for the first quarter as compared to the P953 million in 2007 during the same period and this could be attributed to “lower refining margins.”

According to Reynaldo David, president of Development Bank of the Philippines (DBP) and one of the two financial advisors tapped by the PNOC to help them decide on whether to purchase Aramco’s stake, JG Summit has expressed interest in acquiring the 40-percent stake being sold by Saudi Aramco. But due to the complicated factors and time constraints, they have shifted their interest in the PNOC shares.

Aside from JG Summit, David said PTT of Thailand, which earlier expressed interest to acquire the 40-percent Aramco shares may shift its attention to the shares of PNOC.

But there are no clear indications yet, adding that PTT, wholly-owned by the government of Thailand is also engaged in refinery and in petrochemical productions.

PTT and JG Summit were supposed to enter into a joint venture for the production of a P26-billion petrochemical plant to be located in Batangas but it did not materialize.

JG Summit’s petrochemical plant was put up in Barangay Simlong, Batangas City on April 6, 1998.

Since then, the company became the country’s first integrated polypropylene (PP) and polyethylene (PE) complex.

JG Summit’s petrochemical activity includes the production of PP used in making films, adhesive tapes, cigarette and candy wrappers, cosmetics, pharmaceutical and food packaging materials.

It also produces PE, particularly the High Density Polyethylene (HDPE) used in making large drums, bleach bottles, shopping bags, crates, nets and pails and Linear Low Density Polyethylene (LLDPE) used for heavy-duty sacks, lamination films, industrial cosmetics, pharmaceutical and food packaging materials.